Cars are so complicated today that if your mechanic tells you you’ve got such and such problems to fix under the hood, at such and such cost, you either trust him or you get another mechanic. Unless you've got very special expertise, there is no way to independently verify his diagnosis.

On the other hand, for one of the most complex “engines” on earth—the S&P 500—there is a way to get under the hood, look at the condition of the engine yourself, and independently verify what the experts are telling you.

However, all too often, many of us (even in the investment business) lift the hood, glance around, and make diagnoses a little too quickly, missing important details. Take a look at the chart below of the S&P 500 over the past five years and all you see is bull market.

S&P 500: Price (2009–14)

But if you pull back and look at a longer time frame—say the past 88 years (since 1926)—you see just how unusual the bull markets of the past 20 years have been, with their jagged ups and downs.

S&P 500: Price (1926–2014)

Price is plotted on a logarithmic scale so that equivalent price changes are represented by the same vertical distance on the scale. This allows for an “apples to apples” comparison between different time periods when looking at a multi-decade time-horizon.

One of the standard things people do when they lift the hood is look at the S&P’s earnings—specifically at earnings-per-share (EPS). The next chart shows a very lovely upward line of EPS growth over the past 5 years—prima facie validation in many people’s eyes for the index’s upward price climb.

A bit more peering satisfyingly confirms that this earnings growth has been matched by revenue growth—a healthy sign—as embodied in the blue revenue growth line versus the red EPS growth line.

S&P 500: EPS vs. Revenue Growth (2009–14)

At this point there is every temptation to shut the hood and go away. Of course the S&P is up! Earnings and revenues are up! Case closed!

But a little more patience yields some troubling contra-facts. For example, see what’s been happening to cash flow over the past 5 years.

S&P 500: Cash Flow per Share (2009–14)

Cash flow growth per share is not as pretty and not as steady-eddy as EPS growth. And look a little further, this time at capital spending:

S&P 500: Capital Expenditure per Share (2009–14)

Pretty interesting! Despite great corporate prosperity, Corporate America is not investing with the same directional vigor as it is producing EPS.

The chart raises some important questions. Is Corporate America not investing because:

It is skimping on investing to generate free cash out of which to pay dividends and buy back stock?

It doesn’t have great profit-making investment opportunities?

The cost of investing is going down—for example, like the cost of computing is going down—thereby requiring fewer dollars to make a given quantum of investment?

There is a structural change to a lower-growth world, with Corporate America just mirroring that reality?

Corporate America is under-investing, plain and simple, and will pay the price for its short-termism?

And if you study the S&P engine more closely, you notice a few other things. For example, revenue per employee is flat.

S&P 500: Revenue per Employee (2009–14)

Maybe this is one reason companies aren't hiring more. On the other hand, maybe employees aren't so productive because they’re not being supported by investment.

Another observation—which we've made for many years at UNIO—is that profit margins, while up a bit, are going toward a 20-year peak. It will be tough to go higher.

And one of the most telling measures of corporate success—return on assets or ROA—has been flattish, a distinct contrast to the upward slope of earnings which everyone is focused on.

S&P 500: Return on Assets (2009–14)

Finally, valuation: there is huge debate over whether the S&P is expensive or not. Here is the trailing price-to-earnings (PE) ratio for the past 64 years. What this tells us is that the S&P is on the expensive side, but not well above historical norms (look at the times the S&P’s PE ratio has been above where it is now: the late 1980s, early and late 1990’s, mid-2008, for example).

S&P 500: PE Ratio (1950–2014)

But the point is too simplistic. Something is “cheap” or “expensive” only in context. Very high quality paintings—Cézannes, for example—are expensive and deserve to be. Given what we've seen under the hood, is the S&P a Cézanne, or something less?

History is changing and the S&P’s valuation has to be dealt with in the context of whether its assets—and the earnings those assets can produce—are of higher- or lower-quality. One must also look at whether the low-interest-rate environment in which these assets and earnings exist is a higher- or lower-quality macro-financial environment.

All of which is to say: there is an abundance of information, analyzable and verifiable by you and me, on the S&P 500 Corporate Engine. You really can look under the hood and see things that look good as well as things that look bad (or, at least, that raise questions). And you really can make some independent judgments.

The problem is—and it is a core phenomenon of our age—what do you do with all the information available to you?

That’s where the real challenge and the real expertise come in.

Where do you look when you lift up the hood?

How do you organize the information you are looking at?

How do you weigh, interpret and understand it effectively?

How do you consolidate this into a decision?

That is the challenge of our bloated information age.

But you can’t even begin to meet it if you don’t lift up the hood and take a good long look.

For one of the most complex “engines” on earth—the S&P 500—there is a way to get under the hood, look at the condition of the engine yourself, and independently verify what the experts are telling you.

However, all too often, many of us (even in the investment business) lift the hood, glance around, and make diagnoses a little too quickly, missing important details. Take a look at the chart below of the S&P 500 over the past five years and all you see is bull market...

If it looks like a bull, snorts and paws like a bull, and charges like a bull, it is a bull. And this is a bull market.

Absolutely, no doubt about it. It is one of the great bull runs in history—already 5 ¼ years old. On March 6, 2009, the S&P 500 was 676.53; on May 31, 2014, it was 1923.57. Total price appreciation: +284%. Compounded annual price appreciation: +22%!

We at UNIO believe that what is driving M&A activity is not so much confidence in the future as much as concern that revenue and profit growth will be harder to come by.

Revenue growth will struggle precisely because the economic landscape will be slow. Profit growth will be grinding because—at 50-year highs in profit margins—it will take every ounce of extra revenue to bring extra growth to the bottom line. We think CEOs and boards sense this problem lies ahead.

Either Warren Buffett is the great investment magician who has been breaking all his own rules left and right. Or he is something else. I think he is something else. I think Buffett is the ultimate broadband investor.

Although I suspect you have never heard of investing described this way, one can categorize investors as being narrowband or broadband.

A deep-value investor who looks for investments that sell at 50% of their intrinsic value and sells them when they reach 100%, fits the description of a narrowband investor.

An investor who looks at multiple factors—perhaps including, but necessarily limited to, value—to make an investment purchase (and then at multiple factors to sell that investment) would better fit the description of a broadband investor.

It is not, for example, about coups d’état, riots in the street, even wars. Risks associated with events tend to spike up and down quickly.

Political risk for the investor is primarily about conditions. A doctor asks: what is the patient’s condition? The investor asks the same question, except that the patient in question is usually thenation: what is the nation’s condition?

When the stock market is way up as the S&P 500 has been—up +167% in just under 5 years (or +23.1% per year)—it is hard to imagine any other way to make money than just "being in the market." Conventional hindsight agrees: just sit tight during bear markets like that of 2007-09, it says, and things will work out. It may take once-in-a-century intervention by the Fed. But the authorities will never leave you stranded.

A year ago, had you asked is Japan ever going to be more than a moribund economy and rudderless nation, a lengthening shadow of its former glory, I would have answered I don't see it.

Had you asked next so put some odds on your view I would have answered something like 10% odds Japan rises out of its Great National Slump, 90% it doesn't. A year ago.

Then late last fall, my view began changing. By New Year's 2013 it had really shifted. We found ourselves in the unaccustomed position of investing in Japan! And looking for more. For me, the odds were now greater than 50% that Japan would rise out of its Great National Slump.